Podcast
Questions and Answers
Using the FIFO method, what is the primary characteristic that distinguishes it from other process costing methods?
Using the FIFO method, what is the primary characteristic that distinguishes it from other process costing methods?
- It combines the costs of opening work-in-progress (WIP) with current period costs.
- It averages the costs of opening WIP and current production to determine the unit cost.
- It considers opening WIP costs separately from current period costs, ensuring these are the first costs transferred out. (correct)
- It ignores the valuation of opening WIP when calculating the cost of goods transferred out.
When calculating the equivalent units of production, how does the degree of completion of closing work-in-process (WIP) affect the calculation?
When calculating the equivalent units of production, how does the degree of completion of closing work-in-process (WIP) affect the calculation?
- The degree of completion is ignored for closing WIP.
- The number of units of closing WIP is multiplied by its percentage of completion for each cost component (materials, labor, overhead). (correct)
- The number of units of closing WIP is divided by its percentage of completion for each cost component.
- The degree of completion is only relevant for materials, not for labor and overhead in closing WIP.
How is the cost of normal loss typically treated in process costing?
How is the cost of normal loss typically treated in process costing?
- It is written off as an expense in the period it occurs.
- It is absorbed by the cost of good units produced. (correct)
- It is treated as a separate product and valued accordingly.
- It is allocated only to the closing work-in-process inventory.
In process costing, what is the primary purpose of calculating 'equivalent units'?
In process costing, what is the primary purpose of calculating 'equivalent units'?
Considering the FIFO method in process costing, how are costs assigned to units transferred to the next department?
Considering the FIFO method in process costing, how are costs assigned to units transferred to the next department?
If the normal loss has a scrap value, how does this affect the cost of goods transferred out?
If the normal loss has a scrap value, how does this affect the cost of goods transferred out?
What is the correct formula to calculate the number of units of normal loss?
What is the correct formula to calculate the number of units of normal loss?
What is the debit entry when recording the cost of materials added to the production process?
What is the debit entry when recording the cost of materials added to the production process?
What is the formula for calculating total cost to be accounted for?
What is the formula for calculating total cost to be accounted for?
How is the value of closing WIP determined?
How is the value of closing WIP determined?
Flashcards
Opening Work in Progress(WIP)
Opening Work in Progress(WIP)
Units in process at the start, partially completed.
Closing Work in Progress (WIP)
Closing Work in Progress (WIP)
Units that are still in the production process at the end of an accounting period.
Normal Loss
Normal Loss
Losses that are expected under efficient operating conditions; uncontrollable.
Units Transferred
Units Transferred
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FIFO Method
FIFO Method
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Input of Materials
Input of Materials
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Direct Labor
Direct Labor
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Study Notes
- The data is for process I of Beta Ltd.
Opening Work in Progress (WIP)
- 1,500 units valued at ₹15,000
- Completion: 100% for materials, 33 1/3% for labor & overhead (OH)
Input of Materials
- 18,500 units at ₹52,000
Other Costs
- Direct labor: ₹14,000
- Overheads: ₹28,000
Closing Work in Progress (WIP)
- 5,000 units
- Degree of completion: 90% for materials, 30% for labor & OH
Normal Loss
- 10% of total input
- Scrap value: ₹2 per unit
Units Transferred
- 15,000 units transferred to the next process
Additional Assumptions and Instructions
- FIFO (First-In, First-Out) method is used
- The cost of opening WIP is fully transferred to the next process
- Process accounts must be prepared based on the provided data
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